SCO to get $100m bailout but law suits to continue

SCO, the Unix company that caused consternation in the open source world by claiming IP rights to part of the Linux code, is getting a cash infusion - providing it keeps up its legal onslaught.

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Five months after filing for Chapter 11 bankruptcy protection as part of a reorganisation effort last September, The SCO Group has unveiled a potential $100 million cash infusion and a plan to take the embattled company private.

SCO said that the cash will come from Stephen Norris & Co. Capital Partners (SNCP) and partners in the Middle East who "have agreed to provide up to $100 million (£50m)to finance a plan of reorganisation for The SCO Group Inc."

Under the deal, which must be approved by the US Bankruptcy Court judge who is reviewing the company's bankruptcy filing, SNCP would gain a controlling interest in the company and take it private.

Two notable clauses are present in a 15-page "Memorandum of Understanding" filed with the court by SNCP to outline the proposal: SCO CEO Darl C. McBride, who has led the company since 2002, would be required to "resign immediately" once the deal is completed, and SCO must "continue to pursue aggressively the company's claims in the Novell/IBM litigation and other pending litigation against AutoZone."

SCO has been on the defensive since 2003, when the company filed a $5bn lawsuit against IBM, alleging that it improperly contributed some of SCO's Unix intellectual property for use in Linux.

SCO then also sued Novell, charging that the company had falsely claimed to own the legal rights to Unix. Last August, SCO was handed a big defeat when a court ruled that Novell is, in fact, the owner of the Unix and UnixWare copyrights. The judge also ruled that as a result, Novell could direct SCO to revoke its copyright infringement claims against IBM.

Under the proposed deal, the cash infusion will mean that SCO "is poised to emerge from Chapter 11 of the United States Bankruptcy Code in the coming year," according to the announcement.

"The board of directors of SCO has unanimously determined that this financing and plan of reorganisation is in the best long-term interest of SCO and its subsidiaries, as well as its customers, shareholders, creditors and employees," the statement continued."

SCO officials declined to answer questions about the arrangement late Thursday.

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